AM Best has affirmed the financial strength rating of ‘A’ (Excellent) and the long-term issuer credit rating of ‘a’ (Excellent) of Delvag Versicherungs (Delvag), with the agency assigning these ratings a ‘stable’ outlook. German-domiciled Delvag is the captive insurer for Deutsche Lufthansa Aktiengesellschaft (Lufthansa), a global aviation group. The agency says the ratings reflect Delvag’s ‘very strong’ balance sheet, in conjunction with its strong operating performance, neutral business profile, and appropriate enterprise risk management. Best’s capital adequacy ratio cites the captive’s risk-adjusted capitalisation as underpinning its balance sheet strength, which remained at the strongest level at the end of 2024. The agency is anticipating Delvag’s prospective risk-adjusted capitalisation to maintain its level, and be further supported by profit and loss absorption agreement with Lufthansa, adding to its balance sheet protection. However, a partly offsetting balance sheet factor is the captive’s “moderately high” dependence on reinsurance to protect its aviation business, although Best says the associated credited risk is mitigated by the use of a diverse, financially strong reinsurance panel. The agency outlines Delvag’s five-year weighted average combined ratio of 85 per cent (2020-2024), calculated by Best, as indicative of a good historical earnings track record, in addition to support from a good balance of underwriting and investment incomes during most years, with the 2024 combined ratio standing at 87 per cent and slightly above the five-year average. According to Best, the captive’s profile is enhanced by its strategic importance to and integration within the Lufthansa group, with Lufthansa recently confirming Delvag’s significance to its ERM strategy.
